South Africa Tax Advice on British Pension Transfers

We are not tax advisors but we do understand taxation of pension funds in the UK. This page is not designed to give you personal South Africa Tax Advice on British Pension Transfers but is designed to provide information that will help people understand the type of South African Tax Advice on UK Pension Transfers they should be seeking.

Assuming you are 55 or older then the Double Tax Treaty (DTT) between South Africa and the UK allows for individuals to obtain their Pension Commencement Lump Sum (PCLS) without any tax being applied. Individuals need to check if there are any local taxes which will apply, and talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

The Double Tax Treaty (DTT) between South Africa and the UK allows for individuals to obtain their income without UK taxation applied, under a special provision and a form that needs to be completed. This means the income from the UK pension fund is treated purely under South African tax rule (under review regarding foreign pensions). You must be 55 or older to access your income from a UK pension. Talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

The Double Tax Treaty (DTT) between South Africa and the country that your QROPS is paramount. For example for Gibraltar there is no DTT, so whereas the UK allows for individuals to obtain their income without UK taxation applied, tax must be paid in Gibraltar making Gibraltar less tax efficient. Also, tax within a QROPS is dealt as a trust and can incur additional tax. Investment Bonds are often recommended for “tax efficiency” but, in essence they are an extra tier of charges to avoid a tax that would not have been applied had the pension been left in the UK; our own calculations mean that charges are roughly 200-400% higher using a QROPS as against a UK pension (Yes, not a miss-print, charges are 2-4 times higher in a QROPS) thus wiping out any supposed tax advantages.

Talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

No, you do not avoid taxes! The pension income is declarable in South Africa exactly as before. See previous point, as you can pay higher charges when using a QROPS which wipes out any supposed tax efficiency.

Indeed, those offshore companies claiming that additional tax is saved from utilising a QROPS over a UK pension, fail to point out that, in most cases, HIGHER potential taxes will apply within a QROPS and there are potential penalties. The exception maybe those with funds in excess of £1,000,000 that may be hit by the Lifetime Allowance ; contact a UK registered adviser to understand the Lifetime Allowance and its tax implications.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

Taxation within a UK pension, and access to the pension both in terms of Pension Commencement Lump Sum (PCLS) and income is dealt with via the interaction between UK pensions, tax for non-UK residents and the Double Taxation Agreement (DTA) that exists between the UK and South Africa. As of April 2016 this is very advantageous for UK pensions paid to South African residents under current legislation (which of course can change).

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE.

You must always declare your funds, and PCLS and any income in South Africa. How they are then treated will depend on the SARS position on UK pension funds and Gibraltar trusts.

There are possible savings of UK tax for those clients with funds in excess of £1,000,000 who would otherwise be hit by the Lifetime Allowance ; again this may not be correct due to the ability to action “lifetime Allowance Protection” at much higher fund values. Contact a UK registered adviser to understand the Lifetime Allowance, Lifetime Allowance protection and its tax implications and a South African tax advisor to understand the tax rules.

Rarely due to new rules. NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

Outside of this it will come down the Double Tax Agreement between where your pension is based (the UK, Gibraltar or Malta) and the way in which local taxes apply where and when you retire. This last part is critical, it is where you retire that counts, not where you currently live and not purely where your pension resides!

Also, it is where your beneficiaries live as well. Once you die then funds will be made available to beneficiaries and taxed on where they live, not where you live!

The answer is a simple – No, and Yes! There are taxes on funds within pensions that cannot be reclaimed. Talk to your local advisors regarding South Africa Tax Advice on British Pension Transfers.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

The Qrops in South Africa (SA) are retirement annuities (RA) and living annuities (LA). The first is for accumulation, the second for generating a retirement annuity. The retirement age is 55, so anytime from then a person can retire from their RA and move the proceeds to a LA. They can then take one third in cash, but if that’s more than R500k, stepped tax rates kick in. So the maximum tax-free lump sum is currently ONLY R500k.

There are various benefits and restrictions:-
All growth and interest is tax free, only annuity income taken is taxed (at standard tax rates)
Stipulate beneficiaries, stays outside estate and free of estate duties
RAs and LAs are denominated in SA Rands only
RAs have investment restrictions – called Regulation 28. Restricts asset class allocations, most importantly the foreign allocation is 25% maximum
LAs don’t have such investment restrictions
It may not be possible to transfer from an SA QROPS. This is a very limited market.

A SIPP is a UK pension, so it is tax neutral. However, there may be considerable other advantages of utilising a SIPP other than tax reasons. See other pages of information on SIPP on this website.

Aisa International is not licensed to give tax advice on pension transfer matters – nothing on this page or website should be construed as personal tax advice in South Africa but only as guidance on the questions you should be seeking answers to.

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Consideration Options & Results

Complete the fields below, then click next to find your target fund value.

Current age

Income planned (annual)

Retirement age

Click next to find your target fund value.

Outline Target Fund Required

£ 0

The projected figure is a guideline target result based on the income figure you have input. It does not take into account inflation. Contact us for an inflation allowed figure by providing your details.

£

Years to Retirement

Outline consideration with respect to time left

With less than 5 years to go it is all about planning. Too many people set a date and then hope that by chance their investment fund will be highest at that point. What you should be doing is planning a requirement and whenever you hit that target lock your fund in.

Outline consideration with respect to time left

We call this the emergency last chance saloon period. This is often the time when people actually start thinking about how they are going to maximise their investment and any shortfall they may have. You still have time to take sensible planned investment risk.

Outline consideration with respect to time left

This period often coincides with other family events like children leaving home. This probably means maximum earning potential, investing and saving and potentially maximum risk taking. You need to take advantage of this period and grow your pension.

Outline consideration with respect to time left

This is the calm before the storm period. When every aspect of life is in between commencement and completion. For your pension savings this is exactly the same and this is when you really need to take a moment, reflect on what you are trying to achieve.

Outline consideration with respect to time left

People often have other priorities with this length of time remaining to retirement. They are home building, looking to expand their mini empires with property and children. However, every dollar saved now means you can save two dollars less in the future.

For personal advice, please tell us about yourself. Click next.

For personal advice, please tell us about yourself.

We have a strict confidentiality policy but the truth is if you don’t contact us we can’t help you.
And we can’t think of alternative method of disclosure.

Name

Country of residence

Telephone

Email

All fields required

If you are a human and are seeing this field, please leave it blank.

Consideration Options & Results

Complete the fields below, then click next to find your target fund value.

Current age

Retirement age

Income planned (annual)

Click next to find your target fund value.

Outline Target Fund Required

£ 0

The projected figure is a guideline target result based on the income figure you have input. It does not take into account inflation. Contact us for an inflation allowed figure by providing your details.

£

Years to Retirement

With less than 5 years to go it is all about planning. Too many people set a date and then hope that by chance their investment fund will be highest at that point. What you should be doing is planning a requirement and whenever you hit that target lock your fund in.

We call this the emergency last chance saloon period. This is often the time when people actually start thinking about how they are going to maximise their investment and any shortfall they may have. You still have time to take sensible planned investment risk.

This period often coincides with other family events like children leaving home. This probably means maximum earning potential, investing and saving and potentially maximum risk taking. You need to take advantage of this period and grow your pension.

This is the calm before the storm period. When every aspect of life is in between commencement and completion. For your pension savings this is exactly the same and this is when you really need to take a moment, reflect on what you are trying to achieve.

People often have other priorities with this length of time remaining to retirement. They are home building, looking to expand their mini empires with property and children. However, every dollar saved now means you can save two dollars less in the future.

For personal advice, please tell us about yourself. Click next.

For personal advice, please tell us about yourself.

We have a strict confidentiality policy but the truth is if you don’t contact us we can’t help you. And we can’t think of alternative method of disclosure.

Name

Country of residence

Telephone

Email

All fields required

Aisa International (Pty) Ltd is regulated by the Financial Services Board | License Number: 47638 | Aisa International (Pty) Ltd, 3rd Floor Heritage House, 20 Dreyer Street, Claremont, Western Cape 7708, Tel +27 (0) 21 823 9729, Mobile: +27 (0) 84 729 2210. | Aisa International (Pty) Ltd is known as Aisa International. Aisa Group also has a U.K. limited corporation called Aisa Direct, which is authorised and regulated by the FCA - Reg.189652, and is also a U.S registered advisor with the Securities & Exchange Commission (SEC) - CRD# 172777 | The guidance contained within this website is targeted at those people who are connected with South Africa. | Aisa International is not licensed to give tax advice on pension transfer matters – nothing on this page or website should be construed as tax advice in South Africa.